Last modified on Sun 14 Nov 2021 05.27 EST
Capitalism has divided opinion violently in Glasgow over the past fortnight. Prince Charles rewarded those global businesses delivering on their commitments to net-zero carbon emissions with his Terra Carta award, declaiming that only the private sector could and would deliver, while Mark Carney, co-chair of the Glasgow Financial Alliance for Net Zero, boasted of the $130tn (£97tn) of private investment funds – doubled in six months – committing to invest in companies signed up to net zero. But capitalism, growth, greenwashing and self-seeking lobbying were denounced by activists and NGOs as the root of the problem. Prince Charles and Carney were dismissed as little better than collaborators in our collective downfall.
In truth, a complex but ultimately hopeful dance is being performed before our eyes. The growing conviction of voters and consumers, further intensified by environmental campaigners at Cop26, that the climate crisis is real is forcing change. Last week, rivalling in importance to what was unfolding at Cop26, came the news from New York that electric pick-up truck manufacture Rivian, hardly in production, had floated for more than $100bn, valuing it at more than Ford and General Motors. It’s the kind of mind-boggling welcome Wall Street gave to young companies making petrol-propelled cars a century ago.
Money is flowing in epic volumes to those companies riding the new consumer tide: driving gas-guzzling pick-ups while forests burn and hurricanes rip through the country with unprecedented force wins disapproving nods even in the darkest recesses of conservative America. The same phenomenon is behind Tesla’s stunning $1tn valuation. Europeans – the British in particular – living in countries where the capitalism is more ossified don’t get to see first hand how rapid economic transformation can be once entrepreneurs recognise where the new markets are developing: they can do good and make billions.
What we as individuals can do and how we think is too easily diminished by the despairing analysis that humanity is doomed by the refusal of governments and big companies to act. Yet, confronted by mounting green convictions, they are acting and with increasing urgency: 130 countries, including the US, China and Australia, are making commitments to net-zero carbon emissions. Sixty FTSE 100 companies have signed up to the UN’s “race to zero” campaign. Our changing views count.
For proof, look at how societies have progressed. I remember when libertarians fulminated against requirements to wear seat belts. Councils now differentiate between recyclable and general household waste – unthinkable 40 years ago. The controversies over smoking in public places? Today, no one wants to inhale secondary tobacco smoke and smoking is seen as antisocial. It’s the same story with gay marriage. In all these areas, the cultural change preceded and laid the basis for progressive legislation cementing what we wanted into law and could not be resisted, however hard the right attempted obstruction.
The environmental genie is out of the bottle. In Europe, greens are in government or coalition government in Austria, Belgium, Finland, Ireland, Sweden and Scotland – and about to be in Germany. Politicians are in the market for votes; Boris Johnson, who is closely tuned to voters’ preferences even if many in his party are not, has been quick to mount a volte face over the climate crisis.
The consequences of the final Cop26 outcome are not clear, but more important is that it has happened at all. The momentum to “keep 1.5 alive” is obvious and that is as vital as the detail. What matters is how national governments and international agencies find ways of directing a capitalism that knows, given what its markets want, that it has to move in this direction.
Here, some models are better than others. Germany’s social market economy is built on a dense interaction between state and business and a whole skein of public/private institutions that ensure that its capitalism is responsive to societal and stakeholder wishes. The transformation of the old iron and steel Ruhr region into one of Europe’s greenest industrial structures could not be achieved without the German business bank, the KfW, or the way German companies embed social purpose in their corporate strategies. The negotiations in Berlin between potential coalition partners over the phasing out of coal and internal combustion engine production – key Green demands – are protracted because, once set, they will be met.
In the US, the extent to which politicians can muster the will to shape where Wall Street obviously wants to go, or whether capitalism might find the capacity to do it on its own, is an open question. Biden’s ambitions to phase out coal have been thwarted for now by Democratic senator Joe Manchin from coal state West Virginia, but the US asset management industry might achieve what politicians cannot. Coal mining may be investment-starved out of business.
The UK is the outlier, suffering from the most ossified capitalism and a chronically underdeveloped framework between business and public institutions. Not for nothing, even predating Brexit, has the UK stock market been the world’s poorest performer for the past 20 years. The concern about our lack of innovation to harness the opportunities now opening up even prompted Sir Patrick Vallance and Lord Browne, co-chairs of the Council of Technology and Science, to write to the prime minister in September urging an overhaul of the financial system so it backs more risk, even extraordinarily advocating the creation of a UK sovereign wealth fund. Amen to that.
Capitalism, as even Marx conceded, will ceaselessly seek out the new, but it has to be shaped by democratic governments. Just as it built railways and steamships in the 19th century, so it will build cars, planes and ships propelled by ammonia, hydrogen and electricity in the 21st. It will build space-based solar power stations supplying electricity to Earth. Companies such as BP and Shell, if they want to exist at all, will have to get out of the fossil fuel business by 2050; responding to shareholder pressure is what both have committed to do. What is vital is not so much Cop26, but, rather, the process, movement and social change it represents. Humanity has to save itself. It will be messy and imperfect – but we’ll get there.
Will Hutton is an Observer columnist
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